STAR FORWARDERS, INC., PETITIONER, VS. HON. MIGUEL R. NAVARRO, PRESIDING JUDGE OF BRANCH XXXI OF THE CFI OF MANILA, ALLIED BANKING CORPORATION AND GENERAL BANK AND TRUST COMPANY…

This is a petition for review on certiorari seeking
to annul the orders of the Court of First Instance of Manila dated November 18, 1977 and July 6, 1978.

The antecedent facts, as culled from the pleadings, are as
follows:

On August 14, 1974, petitioner Star Forwarders, Inc. (SFI) filed
a complaint against private respondent General Bank and Trust Company (GENBANK)
for breach of contract and damages, docketed as Civil
Case No. 95027 before the then Court of First Instance of Manila, Branch
XXXI.  The complaint contained the
following allegations:  that on April 26,
1974, for valuable consideration, GENBANK issued to SFI an irrevocable letter of credit (p. 36, Rollo)
for P1,773,750.00 payable in eleven equal installments; that, by the terms of
the letter of credit, the payment of each installment shall be made by GENBANK
to SFI against bills of exchange drawn by the latter, without recourse,
on the bank’s client, Inarda Development Corporation (IDC); that, after paying four
installments, GENBANK wrote SFI informing the latter that it had
cancelled the letter of credit
on the ground that its issuance was
attended by anomalies (p. 37, Rollo); that on August
13, 1974, SFI presented to GENBANK a bill of exchange drawn on IDC which GENBANK
refused to honor; and that the failure of GENBANK to comply with its
obligations under the irrevocable
letter of credit caused SFI actual and compensatory damages.

With prior leave of court, SFI filed an amended complaint (pp.
30-35, Rollo) impleading
private respondent Allied Banking Corporation (ALLIED) as an additional
defendant on the allegation that the latter,
by virtue of an agreement with, or authority given by the Central Bank and/or
GENBANK had acquired all the assets and assumed all the liabilities of GENBANK,
and that, in the alternative possibility that its liabilities were not assumed,
the transfer of assets was in fraud of creditors.  Therefore, SFI prayed that private
respondents be ordered to comply with the letter of credit, to pay damages,
expenses of litigation and costs of suit.

In its answer to the complaint (pp. 40-46, Rollo),
GENBANK admitted the genuineness of the irrevocable letter of credit but
averred, inter alia, that the same was
secured through fraud and serious misrepresentation committed by IDC in
connivance with the then incumbent manager of its (GENBANK) Roosevelt Branch in
Quezon City, and that subject letter of credit was not supported by any sufficient and valuable
consideration.

For its part, ALLIED filed a motion to dismiss the amended
complaint (pp. 47-53, Rollo) based on the grounds
that:  (1) the complaint states no cause
of action against it, and (2) the court has no jurisdiction over the subject
matter of the suit.  The second ground for dismissal was invoked since on March 25, 1977, the Monetary
Board of the Central Bank, by virtue of the authority vested in it under Republic Act No. 265 (Central Bank Act) as amended by Presidential Decree No. 1007, issued Resolution No. 675
forbidding GENBANK to do business in the Philippines and at the same
time designating Mr. Arnulfo B. Aurellano,
Assistant to the Governor of the Central Bank, as liquidator.  Subsequently, on March 29, 1977, the Monetary Board, thru
Resolution No. 677, ordered the liquidation
of GENBANK.  On April 1,
1977, the Central
Bank, by the Solicitor General, filed a “Petition for Assistance in the
Liquidation of General Bank and Trust Company” before the Court of First
Instance of Manila, Branch IV docketed as Special Proc. No. 107812,
pursuant to Section 29 of Republic
Act No. 265 as amended by Section 1 of Presidential Decree No. 1007.  On the theory that with the declaration of
insolvency of GENBANK and the filing in
court of said petition, ALLIED averred that SFI’s
claim for breach of contract allegedly committed by GENBANK should be filed and
ventilated in that court (Court of First Instance of Manila, Branch IV).

Opposing the motion to dismiss (pp. 54-58, Rollo),
SFI alleged that the determination as to whether or not ALLIED had assumed all
the liabilities of GENBANK can only be made after trial on the merits, and that there were no insolvency proceedings proper where claims against GENBANK may
be filed and prosecuted.

In an order dated September 19, 1977 (pp. 59-61, Rollo), the trial court denied the motion to dismiss ruling
that the amended complaint stated a cause of action against the private
respondents and that the alleged existence of an insolvency proceeding wherein SFI’s claim should be filed is evidentiary in nature which can only be determined after trial on
the merits.

ALLIED moved for a
reconsideration of the order of denial (pp. 62-66, Rollo)
insisting that jurisdiction to try the instant claim against GENBANK rests with
Branch IV of the Court of First Instance of Manila which is hearing the
petition for insolvency of said bank.

 SFI opposed the motion for
reconsideration (pp. 67-71, Rollo) on the grounds
that ALLIED cannot invoke the alleged insolvency of GENBANK which can only be
done by the latter and that, even in the case of GENBANK, the special
proceeding instituted by the Solicitor General is not one where the assets of GENBANK will be made available for the
satisfaction of its liabilities.

On November 18, 1977, the trial court issued an order granting
the motion for reconsideration filed by ALLIED and dismissing the amended
complaint against both private respondents, the dispositive
portion of which reads (pp. 84-85,
Rollo):

“FOR ALL THE FOREGOING, the Motion for Reconsideration of the
Order of 19 September 1977
should be, as it is hereby, granted. 
Consequently, the said Order is hereby reconsidered and set aside.  The amended complaint is dismissed, without
prejudice to filing the same in the Court in insolvency.  Without pronouncement as to
costs.

“SO ORDERED.”

According to the trial court, upon the
filing of the petition for assistance in the liquidation of GENBANK, the court
wherein it was filed acquires jurisdiction, in the same proceeding, to adjudicate disputed claims against the bank
to the exclusion of all other courts and that such defense can be invoked even by ALLIED since it concerns
jurisdiction.

SFI
moved for a reconsideration of said
order (pp. 86-95, Rollo) contending that the special
proceeding adverted to is not an
insolvency proceeding and, even if it were, claims already filed and pending in
other courts need not be dismissed as they can be defended by the appointed receiver or liquidator.

After considering said motion for reconsideration, the opposition
thereto (pp. 96-102, Rollo), as well as the testimonial and documentary evidence
adduced during the preliminary hearing on the jurisdictional issue, the trial court, on July 6, 1978, issued an
order denying the motion for reconsideration (pp. 104-105, Rollo).

Hence, the present petition.

On December 11, 1989, considering the length of time that this
case has remained pending and as a practical measure to ease the backlog of
this Court, We resolved to require the parties to manifest whether or not they are still interested in
prosecuting this case, or supervening events have transpired which
render this case academic or otherwise substantially affect the same (p.
366, Rollo).

On January 12, 1990,
SFI manifested that it is not aware of any event subsequent to the filing of
the petition which would render the case academic (pp. 367-368, Rollo).  On January 15, 1990, ALLIED manifested that it has no objection
to the dismissal of this case. 
Even if SFI has a valid cause of
action, it should prosecute the same before the court where the petition to dissolve GENBANK is still pending (pp. 370-371, Rollo).  On February 20, 1990, the Solicitor General manifested that he is
not aware of any supervening event which
would render the case academic (p. 377, Rollo).

The issue presented is whether or not the dismissal of the complaint
filed by SFI before the trial
court was proper.

In support of this petition, SFI alleges that the “Petition
for Assistance in the Liquidation of General Bank and Trust Company” is
not an insolvency proceedings proper
because (1) there is no allegation therein surrendering the assets
of GENBANK to the court; (2) it does not contain any list of creditors of GENBANK; and (3) what is being asked is for the court to
see to it that ALLIED would assume all the
liabilities of GENBANK.  Under these
circumstances, there is absolutely no sense in holding that a complaint for the
enforcement of the liability of GENBANK which is already being prosecuted in
the proper court (Court of First
Instance of Manila, Branch XXXI) not only against it but also against ALLIED which
assumed such liability should be dismissed in order to be prosecuted solely
against GENBANK in another court (Court of First Instance of Manila, Branch
IV).  Additionally, SFI asserts that the case of
Hernandez, et al. v. Rural Bank of Lucena, Inc., et
al., G.R. No. L-29791, January 10, 1978, 81 SCRA 75 invoked by both the
Solicitor General and ALLIED is not applicable because the facts therein are
different from the facts in the
case at bar, namely:  (1) there was an insolvency proceedings
proper the purpose of which was to convert the assets of the bank into cash for
distribution to its creditors; (2) the case that was filed in another court was for consignation,
the determination of which requires an examination of the books of accounts of the insolvent bank
and those books were already turned over to the receiver appointed by the Central Bank pursuant to an order of the
insolvency court, and (3) the insolvency proceedings was already pending when
the action for consignation was filed by Hernandez in another court and such fact was known to Hernandez.

From a perusal of the allegations of SFI, it is at once
discernible that it does not argue squarely against the dismissal of its
complaint by the trial court.  It is not for Us
to rule in this petition on the merits of
the proceedings before Branch IV of the Court of First Instance of
Manila.  Instead, Our
concern here is regarding jurisdiction over the action filed by SFI.  The dismissal of SFI’s
complaint by the trial court finds
support both in law and jurisprudence. 
Section 29 of Republic Act No. 265 as amended by Section 1 of
Presidential Decree No. 1007 provides, to wit:

“x x x.

“If the Monetary Board shall determine and confirm within the said
period that the banking institution is insolvent or cannot resume business with
safety to its depositors, creditors and the general public, it shall, if the
public interest requires, order its liquidation, indicate the manner of its liquidation and approve
a liquidation plan.  The Central Bank shall, by the Solicitor General, file
a petition in the Court of First
Instance reciting the proceedings which have been taken and praying the
assistance of the court in the liquidation of the banking institution.  The court shall have
jurisdiction in the same proceedings to
adjudicate disputed claims against the bank
and enforce individual liabilities of the stockholders and do all that is
necessary to preserve the assets of the banking institution and to implement
the liquidation plan approved by the Monetary Board.  The Monetary Board shall designate an
official of the Central Bank as liquidator who shall take over the functions of
the receiver previously appointed by the Monetary Board under this
Section.  The liquidator shall, with all
convenient speed, convert the assets of
the banking institution to money or sell, assign or otherwise dispose of
the same to creditors and other parties
for the purpose of paying the debts of such bank and he may, in the name
of the banking institution, institute such actions as may be necessary in the
appropriate court to collect and recover accounts and assets of the banking
institution.  (underscoring
supplied)

“x x x.”

The records readily reveal that the claim
of SFI is a disputed claim.  GENBANK, in
its answer to the complaint filed by SFI before the trial court stated, among
other things, “[t]hat the letter of credit on question was secured through
fraud and serious misrepresentations committed
by the applicant Inarda Development Corporation, in
connivance with the then incumbent Manager of Defendant’s Roosevelt Branch in Quezon City, who taking undue advantage of his position
fraudulently manipulated the transaction, with the knowledge and consent of plaintiff (SFI) as
beneficiary, resulting in the issuance of the Letter of Credit, to the damage
and prejudice of defendant (GENBANK)” (p. 42, Rollo).  Applying the aforequoted
provision, the Court of First Instance where the “Petition for Assistance
in the Liquidation of General Bank and Trust Company” was filed has the
jurisdiction to resolve said claim which, in this case, is Branch IV of the
Court of First Instance of Manila.  The
rationale behind this provision is set forth in the “whereas” clauses
of Presidential Decree No. 1007:

“WHEREAS, where a bank
has become insolvent or can not continue to resume business with safety to its
depositors and other creditors, its assets must be preserved and its debts and
accounts settled as expeditiously as possible; and

“WHEREAS, the action of the Central Bank in
connection with the above should not be hampered by unnecessarily tedious
and protracted court litigations.” (underscoring supplied)

Along the same line as these reasons are
considerations of practicality and necessity, and to prevent multiplicity of suits.  Indeed,
it will be burdensome on the
part of the liquidator if he were to appear before several courts to litigate
claims against the insolvent bank. 
Resolving a similar issue, We said in the case of Hernandez, et al. v.
Rural Bank of Lucena, Inc., et al., supra,
that “x x x the
liquidation court or the Manila court has exclusive jurisdiction to entertain
the claim of the Hernandez spouses that their mortgage obligation had already
been extinguished by means of their tender of the check issued by the San
Pablo Colleges.” While We concede
that the facts of the Hernandez case are not on all fours with the present case
yet, what is controlling is Our ruling therein that convenience and
practicality are the overriding considerations in vesting
exclusive jurisdiction on the
liquidation court to entertain the claim of the Hernandez spouses, and which We
are simply reiterating now.

The notion of SFI that the suit to be filed before the
liquidation court will only be against GENBANK is incorrect.  It will also be a suit against ALLIED since, and as SFI is very much aware,
it (ALLIED) had assumed all the obligations of GENBANK, as evidenced by
Resolution No. 677 (p. 77, Rollo):

“x x x.

“C.  To approve the following plan of liquidation
of Genbank:

‘1. All the assets of GENBANK shall be purchased by the Lucio Tan Group which shall also assume
all the liabilities of Genbank
under the following terms and conditions: 
(underscoring supplied)

‘x x x .’
“

and in the
Certification prepared by liquidator Arnulfo B. Aurellano (p. 72, Rollo);

“x x x.

“4.  That
in a Memorandum of Agreement dated 9 May
1977 executed by the Allied Banking Corporation and Arnulfo
B. Aurellano as Liquidator of General Bank and Trust
Company, and entered in the notarial book of Notary
Public Marino E. Eslao as Doc. No. 2882, Page No. 17,
Book No. VII, Series of 1977, the former acquired all the assets and
assumed all the liabilities of the General
Bank and Trust Company; (underscoring supplied)

“x x x.”

ACCORDINGLY, the petition is hereby DENIED.  The orders of the court dated November 18, 1977 and July 6, 1978 are AFFIRMED.

SO ORDERED.

Narvasa, (Chairman), Cruz, Gancayco, and Griño-Aquino, JJ., concur.